We argue that segmented labor markets with flexibility at the margin (e.g., just affecting
fixed-term employees) may achieve similar volatility than fully deregulated labor
markets. Flexibility at the margin produces a gap in separation costs among matched
workers that cause fixed-term employment to be the main workforce adjustment
device. Moreover, in the presence of limitations in the duration and number of renewals
of fixed-term contracts, firms respond by fostering labor turnover which further raises
the volatility of the labor market. We present a matching model with temporary and
permanent jobs where (i) the gap in firing costs and (ii) restrictions in the use of fixedterm
contracts play the central role to explain the similar volatility observed in many
regulated labor markets with flexibility at the margin vis-à-vis the fully deregulated
ones.

dc.format.extent

302457 bytes

dc.format.mimetype

application/pdf

dc.language.iso

eng

dc.language.iso

eng

dc.relation.ispartofseries

UC3M Working papers. Economics

dc.relation.ispartofseries

07-32

dc.rights

Atribución-NoComercial-SinDerivadas 3.0 España

dc.rights.uri

http://creativecommons.org/licenses/by-nc-nd/3.0/es/

dc.subject.other

Flexibility at the margin

dc.subject.other

Volatility

dc.subject.other

Separation costs

dc.subject.other

Matching model

dc.title

Flexibility at the margin and labor market volatility in OECD countries